Negotiating a settlement agreement

Written from primary sources · Editor-reviewed · Law current as of 19 September 2026

By the exitagreement.co.uk editorial team · Published 19 September 2026 · Last reviewed 19 September 2026 · 9 min read

6 primary sources cited on this page. How we check what is on this site

The first offer is an opening position. Everyone in the room except you does this regularly and knows that. What follows is not a list of tips — it is an inventory of what is actually movable, because the most common mistake here is spending all your credit arguing about the half of the figure that is fixed.

Key points

Part 1 is not a negotiation, it is an audit. Notice, holiday and unpaid wages are whatever the contract and the calendar say. Checking them finds errors; arguing about them does not find money.
Part 2 is the negotiation, and it is priced against what saying no would cost the employer — not against what you have lost.
Several valuable things cost the employer almost nothing: an agreed reference, an agreed announcement, a covenant release, the legal fee.
s.43J makes a gagging clause void in so far as it tries to prevent a protected disclosure, however the agreement is worded.
The clock that matters is not the signing deadline. It is the tribunal time limit running underneath the whole conversation.

Audit the first half, negotiate the second

Two offers with the same headline total can be worth very different amounts after tax, because only the second part can use the threshold. Ask which figure sits in which part before you compare anything.

The same diagram as a table

Worked example of a two-part settlement figure
Part	What it covers	Amount	Tax treatment
Part 1 — contractual	Notice pay, holiday pay, unpaid wages, bonus or commission	£9,200	Income tax and National Insurance in full
Part 2 — ex gratia	Statutory redundancy pay, compensation for loss of employment, injury to feelings	£17,500	First £30,000 free of tax and National Insurance
Total	—	£26,700	—

Threshold figure: Income Tax (Earnings and Pensions) Act 2003, s.403(1). Illustrative amounts.

Work through the contractual items first, because they are checkable and because errors in them are common. Is the notice period the one in your contract, or the statutory minimum applied by someone who did not look? Is the holiday accrual calculated to the termination date or to the date the letter was written? Is a bonus that had already been earned included at all?

Each of those is a factual correction rather than a request, which makes them easy to win and easy to put in the same email. They also do something useful to the tone: a counter-offer that opens with three specific corrections establishes that you have read the document, and that changes how the rest of it is received.

Then leave Part 1 alone. The statutory notice floor is fixed by s.86(1) of the Employment Rights Act 1996 and your contract can only improve on it. There is no version of this where a persuasive argument produces more holiday than you accrued.

What the second half is actually priced against

The instinct is that compensation should reflect what you have lost. It does not, and understanding that is worth more than any script.

An employer offering a settlement is buying certainty. What they are willing to pay for it is a function of what uncertainty costs them: legal fees to defend a claim, management time, disclosure, the risk of an adverse finding, and in some cases the risk of the finding being public. The employment tribunal does not normally order costs, which means an employer who wins still pays their own lawyers. That asymmetry is the whole basis of the negotiation.

What raises the price of saying no
Factor	Why it costs the employer more
A discrimination element	No qualifying service, no cap on compensation, injury to feelings available on top, and a claim that is harder to dispose of early.
A protected disclosure	Day-one right, uncapped, and the detriment claim can survive independently of the dismissal claim.
A grievance already on file	A documented dispute. It creates a paper trail the employer cannot now choose not to have, and it affects whether the settlement conversation was protected at all.
A process that looks predetermined	A performance plan opened three weeks before a settlement offer is evidence about the plan, not about the performance.
A claim already issued	They are already paying. Every week of delay is a cost they cannot recover.
Length of service	Raises the statutory floor and the compensatory element — but less than most people expect, and far less than a day-one right does.

Run these through the calculator to see roughly where they land before you write anything.

The things that cost them nothing

This is where inexperienced negotiators leave the most on the table. Money comes out of a budget somebody has to justify. Several other things come out of nowhere at all, which is exactly why they are easier to get.

An agreed reference, attached as a schedule. Not “a reference will be provided” — the actual text, annexed, with a clause saying any reference given will be in those terms.
An agreed announcement. What colleagues and clients are told, in words you have seen. Cheap to give, disproportionately valuable to you.
Release or narrowing of restrictive covenants. If a non-compete is going to stop you taking the obvious next job, releasing it is worth more than a month’s pay and costs the employer nothing unless they genuinely intended to enforce it.
The legal fee, or more of it. Raising a £500 contribution to £750 is a smaller ask than raising the settlement by £250, and it lands in a different budget.
Equipment and benefits. Keeping the laptop or the phone, private medical cover running to a date, a pension contribution in the final month.
Outplacement support. Often already on a corporate retainer, so the marginal cost of adding you is close to zero.
A mutual non-derogatory clause. Most drafts bind only you. Asking for it to run both ways is reasonable and is usually granted.

Want someone to do this part for you?

Send the details and the deadline. A firm can tell you on the first call whether a counter-offer is worth making in your situation.

What cannot be bought, whatever the draft says

Some terms are void regardless of what you sign, and knowing which ones removes a lot of anxiety from the reading.

Employment Rights Act 1996, section 43J

(1) Any provision in an agreement to which this section applies is void in so far as it purports to preclude the worker from making a protected disclosure. (2) This section applies to any agreement between a worker and his employer (whether a worker’s contract or not), including an agreement to refrain from instituting or continuing any proceedings under this Act or any proceedings for breach of contract.

Read the section on legislation.gov.uk

So a confidentiality clause is enforceable in general and void in so far as it purports to stop you making a protected disclosure. You do not need to negotiate that out of the document for it to be ineffective — although a well-drafted agreement will carve it out expressly, and asking for the carve-out is a reasonable way to find out how the other side is thinking.

Similarly, s.203(1) makes any provision void in so far as it tries to exclude the operation of the Employment Rights Act, which is why the agreement has to satisfy all six conditions in s.203(3) instead. And some claims cannot validly be settled at all in advance — accrued pension rights and personal injury claims you do not yet know about are the usual examples, and a well-drafted agreement excludes them by name.

Sequencing: what to do in what order

Read the agreement before responding to anything. Even a same-day response is better after reading it, and most of your leverage is in the detail.
Deal with the deadline separately from the figure. They are two different requests and bundling them lets the employer answer one and ignore the other. How to ask for more time.
Send the corrections. Factual, specific, unarguable. These are not the negotiation, they are the credential.
Make one counter-offer, with a reason attached. Not a number in isolation — a number and the claim it reflects. A single well-reasoned counter beats three escalating ones.
Ask for the free things in the same message. Reference, announcement, covenants, fee. Do not save them for a second round that may not happen.
Watch the real clock. If a tribunal time limit is approaching, notify Acas for early conciliation. It costs nothing and it pauses the limitation period while you keep talking.

The thing that weakens you most

Not a weak claim — a missed deadline. Time limits in employment are short and they are applied strictly. A negotiation that drifts past one hands the employer everything, because the claim they were buying off has stopped existing. If your matter is anywhere near a limitation date, that fact outranks every tactic on this page.

If you already signed

A signed settlement agreement is a contract and reopening one is a different, harder job. It is not automatically impossible: the six conditions in s.203(3) have to have been met, and if one was not — no independent adviser, an adviser who was not insured, an agreement that did not identify them — the waiver may not do what it was supposed to. That is a question for a solicitor who can read the document, and it is time-sensitive, because whatever the agreement was meant to settle is still on its own clock.

Common questions

Can you negotiate a settlement agreement?

Yes. The first offer is an opening position and both sides know it. What is worth understanding before you start is that only part of the figure is negotiable at all: the contractual half — notice, holiday, unpaid wages — is whatever the contract and the calendar say, and arguing about it mostly produces a correction rather than an increase. The ex gratia half is the negotiation.

How much more can I ask for?

There is no rule and anyone quoting one is inventing it. What moves the number is the cost and risk of the claim the employer is buying off, so the useful question is not 'how much more' but 'what would it cost them to say no'. A tribunal claim they have to defend costs them legal fees they will mostly not recover even if they win, and that is the arithmetic the offer is priced against.

Will asking for more make them withdraw the offer?

It is possible and it is rare, because withdrawing an offer wastes what the employer has already spent getting to it and puts them back where they started. The bigger risk is not withdrawal but delay, and delay matters because tribunal time limits keep running in the background while you negotiate.

Can they stop me saying I was treated badly?

Only to a point. Confidentiality and non-derogatory clauses are normal and enforceable in general — but s.43J of the Employment Rights Act 1996 makes any provision void in so far as it purports to stop a worker making a protected disclosure. A clause that tries to gag whistleblowing is void to that extent, whatever else the agreement says.

Should I negotiate myself or use a solicitor?

Both happen. Doing it yourself costs nothing and keeps you in control of the tone. A solicitor changes the signal — an employer who receives a solicitor's letter reads it as a claim becoming more likely, which is exactly the risk they are paying to avoid. The trade-off is cost: a negotiation is not usually inside a fixed sign-off fee.

What is worth asking for besides money?

An agreed reference, an agreed internal and external announcement, release or shortening of restrictive covenants, retention of a laptop or phone, continued private medical cover to a date, payment of the legal fee, and an outplacement contribution. Several of these cost the employer little or nothing, which makes them the easiest things in the document to win.

Does it help to mention a tribunal claim?

Naming a specific claim with a specific basis is much stronger than a general threat, and a general threat can read as bluster. Be aware of the other side of it: if what you have is a discrimination or whistleblowing issue rather than unfair dismissal, s.111A does not protect the settlement conversation at all, which changes what both sides can later refer to.

Is there a best time to make a counter-offer?

Early enough that the employer has not already treated the matter as closed, and after you have read the agreement rather than before. A counter-offer that arrives with three specific corrections to the document attached reads as considered. One that arrives within an hour of the offer reads as reflex.

Sources cited on this page

Every figure above was read from the source it is attributed to on 19 September 2026. How we check this.